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QE3 Removes Price Ceiling for Gold and Silver

Peter Schiff, chief executive officer of Euro Pacific Capital, recently gave an interview discussing the prospects of gold. When asked how high the price of gold may reach, he responded that there is no ceiling for the precious metal, because there is no limit on how much money will be printed. The Federal Reserve’s latest announcement confirms this theory, and paves the way for much higher gold and silver prices.

On Thursday, the central bank proved it is willing to do whatever it takes to prop up asset prices in an effort to cause a wealth effect among consumers and spur a recovery. The Federal Open Market Committee launched yet another quantitative easing program. This time, the Federal Reserve will buy agency mortgage-backed securities at a pace of $40 billion per month, in addition to its current Operation Twist 2 program. The net effect of these actions will increase the Federal Reserve’s long-term holdings by about $85 billion each month through the end of the year. Furthermore, the central bank extended out its zero interest rate policy to at least mid-2015.

Interestingly, QE3 will be open-ended, meaning that the Federal Reserve has no set limit to how long the fresh money printing will last. It will also conduct additional asset purchases if the labor market does not improve. In a press conference following the statement, Fed Chairman Ben Bernanke explained, “We’re looking for ongoing, sustained improvement in the labor market. There’s not a specific number we have in mind. What we’ve seen in the last six months isn’t it.” The headline unemployment rate in the U.S. has remained above 8 percent for 43 consecutive months.